Wilkie v. Auto-Owners Ins. Co., Docket No. 119295, Calendar No. 1

CourtSupreme Court of Michigan
Citation664 N.W.2d 776,469 Mich. 41
Docket NumberDocket No. 119295, Calendar No. 1
PartiesKay WILKIE, Personal Representative of the Estate of Paul K. Wilkie, Deceased, and Janna Lee Frank, Plaintiff-Appellees, v. AUTO-OWNERS INSURANCE COMPANY, Defendant-Appellants.
Decision Date16 July 2003

Thomas A. Doyle, P.C. (by Thomas A. Doyle), Lansing, MI, or plaintiff-appellee Wilkie.

Grua, Jamo & Young, P.L.C. (by Jonathan E. Maire), Lansing, MI, for plaintiff-appellee Frank.

Dykema Gossett, PLLC (by Lori M. Silsbury, Donald S. Young, & Jennifer G. Anderson), Lansing, MI, for the defendant-appellant.



This case involves a dispute between Auto-Owners Insurance Company and its insureds, Janna L. Frank and the decedent, Paul K. Wilkie, regarding underinsured-motorist coverage.1 Defendant Auto-Owners argues that plaintiffs Frank and Wilkie's2 recoveries from Auto-Owners are limited under the terms of the policy to $50,000 each. Frank and Wilkie argue that they are each owed $75,000. The trial court and Court of Appeals agreed with Frank and Wilkie. We reverse.

I. Facts

On April 17, 1996, Janna Frank was driving east on Maple Rapids Road in Clinton County, with Paul Wilkie as a passenger. At the same time, Stephen Ward was driving west on Maple Rapids Road. Witnesses described his driving as erratic shortly before his vehicle crossed the center line and collided with Frank's car, injuring her and causing the deaths of Ward and Wilkie.

Ward's vehicle was insured under a Citizens Insurance Company no-fault automobile-insurance policy having limits of $50,000. Wilkie's estate and Frank shared this sum, with each receiving $25,000. Wilkie's vehicle was insured under an Auto-Owners no-fault automobile-insurance policy that provided, in addition to the mandatory coverages required under Michigan's no-fault automobile-insurance statute, M.C.L. § 500.3101 et seq., an optional coverage described as underinsured-motorist coverage. Speaking generally, this coverage was intended to supplement insurance proceeds received by the insured from the tortfeasor had the tortfeasor not been underinsured. This added coverage had limits of $100,000 for each person to a total of $300,000 for each occurrence, and also provided that Auto-Owners' liability was limited to the amount by which these limits exceeded the underinsured motorist's own insurance coverage. The policy clearly stated that the Auto-Owners' limits of liability were not to be increased because of the number of persons injured, claims made, or automobiles involved in the accident.3

Auto-Owners did not contest that the accident was Ward's fault and agreed that both Wilkie's and Frank's damages were at least $100,000. Disputed, however, was the total amount due from Auto-Owners to Wilkie and Frank. Auto-Owners asserted that it only owed Wilkie and Frank $50,000 each. As it understood the contract terms, the $100,000 policy limit would be reduced by the $50,000 coverage of the Ward policy. Wilkie and Frank, for their part, claimed that Auto-Owners owed each of them $75,000. They reasoned that, having equally split the Ward policy limits of $50,000, only the $25,000 they received should have been subtracted from the $100,000 policy limit to determine the amount each was due.

Unable to reach a resolution of this dispute, Wilkie and Frank sought declaratory relief against Auto-Owners in the Clinton Circuit Court. The plaintiffs moved for summary disposition predicated on their understanding of the contract's requirements. The trial court granted their motion and ruled that only the amount actually received by each of them, $25,000, and not the entire amount of Ward's policy limits, $50,000, should be set off against the amount available to them, $100,000, under the underinsured-motorist provision. Thus, according to the trial court, Wilkie and Frank were each entitled to $75,000 from Auto-Owners.

Auto-Owners appealed, and the Court of Appeals4 held that the language of the Auto-Owners policy was ambiguous in directing how to apply the underinsured policy limit as a setoff against the amounts Auto-Owners owed. That is, Auto-Owners' or the insured's readings were equally plausible, or as the Court described it, the contract, in this particular, could be interpreted in "at least two ways...." Id. at 527, 629 N.W.2d 86. Pursuant to the doctrine of interpreting an ambiguous contract against the drafter,5 it construed the language that it found unclear against the drafter and in favor of the insureds. Id. Thus, each claimant was awarded $75,000. The Court bolstered this by stating that the conclusion was the same as one that a utilization of the doctrine of "reasonable expectations" would produce. The Court determined the reasonable expectation of an insured with a similar policy was to expect to always be able to predict with certainty how much coverage will be available from an underinsured motorist. Accordingly, to allow the insurer to utilize variables such as the number of claimants, automobiles involved, claims made, or suits brought to alter the amount due the insured would run the contract afoul of those expectations. To preclude this occurring, the Court concluded that the Court's duty was to conform the contract to what it had determined was reasonable to expect in a contract of this sort. In this case, that meant that on the basis of variables such as those mentioned above, which were, in fact, included in the Auto-Owners policy, Auto-Owners could not alter the insured's recovery. The sum of this argument was to return the Court's consideration to the clauses they had already determined were ambiguous, and, thus, to the earlier conclusion that Auto-Owners was required to pay Wilkie and Frank $75,000 each.

We granted Auto-Owners leave to appeal.6

II. Standard of Review

The proper interpretation of a contract is a question of law, which this Court reviews de novo. Archambo v. Lawyers Title Ins. Corp., 466 Mich. 402, 408, 646 N.W.2d 170 (2002). The same standard applies to the question of whether an ambiguity exists in an insurance contract. Farm Bureau Mut. Ins. Co. v. Nikkel, 460 Mich. 558, 563, 596 N.W.2d 915 (1999). Accordingly, we examine the language in the contract, giving it its ordinary and plain meaning if such would be apparent to a reader of the instrument. Bianchi v. Automobile Club of Michigan, 437 Mich. 65, 71 n. 1, 467 N.W.2d 17 (1991).

III. Analysis

Under the language of the underinsurance policy at issue here, the insurer agreed to pay $100,0007 for each person to a total of $300,000 for each occurrence for bodily or compensatory damages to individuals covered by the policy if each person would have been entitled to recover all those sums from the other driver, but was precluded from doing so because the other driver was underinsured (s1[a] and [b] ).8 The insurer's liability was then limited by a provision (s 4[a][1] and [2]) that states that the amount by which the $100,000 for each person to a total of $300,000 for each occurrence exceeds the total limits available to the owner or operator of the underinsured vehicle will determine the amount to be paid.9 Further clarity is given to this clause by the next provisions (s 4[a][2] and [3]), which say that the amounts available are not increased because of the claims made or persons injured.10

The Court of Appeals, as urged by the plaintiffs, approached this language by holding that s4(a)(1) of the contract was ambiguous because it could be "reasonably understood in differing ways." 245 Mich.App at 524, 629 N.W.2d 86. That is, s 4(a)(1) of the contract could be interpreted to direct that the $100,000 from the Auto-Owners policy be reduced by either $50,000 or $25,000, depending on how one chose to read it. That being the case, the Court construed the contract against its drafter, Auto-Owners. The Court's ambiguity analysis of the language of s 4(a)(1) is, at best, questionable because the language appears clearer than the Court found it to be. Paragraph 4(a)(1) states that the limit of liability for underinsured-motorist coverage shall not exceed "the amount by which the Underinsured Motorist Coverage limits stated in the Declarations exceeds the total limits of all bodily injury liability bonds and policies available to the owner or operator of the underinsured automobile...." (Emphasis added.) In this case, the underinsured-motorist coverage limit stated in Auto Owner's declaration is $100,000. The total limit of all bodily-injury liability policies available to the owner of the underinsured automobile, i.e., Ward, is $50,000. Therefore, the amount by which the underinsured-motorist-coverage limits stated in the declarations exceeds the total limits of all bodily-injury policies available to the owner of the underinsured automobile is clearly $50,000, not $75,000. Contrary to the contention of Court of Appeals, this provision cannot be "reasonably understood" to be referring to the amount actually received by the claimant because the provision specifically refers to the total available to the owner. Yet, whatever the merits of the Court of Appeals analysis, the panel's conclusion is fatally undermined when s 4(a)(1) is read, as it must be,11 with s s 4(b)(2) and (3). These later paragraphs settle any perceived ambiguity in s 4(a)(1) by stating that the amounts to be paid will not be increased because of claims made, suits brought, or persons injured. Interpreting this provision to mean that each plaintiff is entitled to $75,000 would increase the limit of liability "because of" the number of claims brought or persons injured, which is clearly contrary to the plain language of s s 4(b)(2) and (3).12

Quite simply, if s 4(a)(1) appears ambiguous by itself, when read with ss 4(b)(2) and (3) the ambiguity is eliminated. That being the case, the insurance contract at issue is unambiguous and should be enforced as its terms dictate. Thus, no...

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